If you own a holiday home in Italy or you plan to purchase one, you may be wondering if there are ways to optimize your investment returns when you are not spending time in your property. If this is the case, renting it short-term through Airbnb may be the right option for you. Undoubtedly, this comes with a number of obligations and rules, as well as with many questions. For instance, how does one turn a residential property into a rental property? What are the economic pros and cons of this? This article will answer these questions and provide you with information about the costs and the legal implications of renting a property on Airbnb.
How do you choose the perfect Airbnb investment property?
If you are thinking of purchasing a property in Italy, there are a few factors you may want to consider in order to make the best choice. While any type of property can be rented out through Airbnb, if you own a flat in a shared condominium you may want to check whether your neighbors and the administrator agree with your decision to rent. Although a lawsuit won in recent years established that individuals who live in other properties in a condominium cannot interfere with a neighbor’s decision to rent a property on Airbnb, having a good relationship with your neighbors will minimize the possibility of internal quarrels and avoid unpleasant issues. Therefore, before you purchase a flat in a shared building it might be a good idea to talk about your plans to your neighbors. It is also advisable to check that the property you would like to purchase is registered as a residential property as opposed to a commercial property.
The purchasing process
Once you have identified the property you would like to purchase and once due diligence has been carried out on the property, you can start the purchasing process. There will be a key figure in the process, i.e., the notary, who plays a fundamental role in Italian conveyance. In fact, any contract transferring the ownership of a property needs to be signed in front of a notary as well as countersigned by the notary in order to be legally binding. In addition, the notary is responsible for calculating the fees that are applicable to the transactions, and for collecting them from the parties.
Having said this, the purchasing process per se is divided in three stages. The first one entails presenting a formal purchase offer (“Proposta Irrevocabile di Acquisto”); if the seller accepts it, the buyer can sign a preliminary contract of sale (“Contratto Preliminare”), which is legally binding. The preliminary contract of sale defines the property that is being sold, the agreed final price, and it also states that the property complies with all legal and building standards, codes and fiscal laws. The preliminary contract of sale also affirms the seller’s commitment to sell the property on or before the agreed closing date. Although this contract does not have the effect of transferring the ownership of the property, it has several legal binding effects between parties. Finally, the third stage entails signing the Final Deed of Sale before a notary. If the buyer cannot attend the meeting, he or she can sign a Power of Attorney and delegate a third party to sign the Final Deed.
Economic benefits and taxation
If you decide to use Airbnb to rent out your property, you can offer potential guests both short- term and long-term agreements. However, it is worth keeping in mind that these two options have different implications in terms of taxation. Firstly, as per Italian law, short-term rental agreements (which cover periods lasting up to 30 days within a year) do not need to be registered at the “Agenzia Delle Entrate” (Italian Revenue Agency) and therefore there is less bureaucracy involved in this type of agreements. Nevertheless, a written contract must still be stipulated between the host and the guest.
As for taxation, if you rent your property as a private individual, the taxation regime which will apply to you will likely be the so-called cedolare secca (flat tax). While it will not allow you to deduct any additional expenses (such as cleaning fees or Airbnb taxes), it will allow you to have a preferential fixed rate of 21% applied exclusively to income generated by short-term rental. While this option is undoubtedly advantageous compared to other taxation regimes, it comes with a few limitations. In particular, in order to qualify for the regime, the services you offer must be limited in order for your property to be classified as a rental property; in other words, you will not be able to offer additional services besides cleaning and other services allowed and offered by Airbnb because if you do so, you will convert your accommodation into a fully-fledged hospitality business, which does not comply with Airbnb’s standards and, as such, you will be eligible to pay business taxes .
Therefore, as mentioned above, there are several aspects to consider when purchasing property and renting it on online rental platforms such as Airbnb. In this sense, an understanding of the legal requirements is essential in order to make a safe investment and maximize one’s investment returns. If you are interested in learning more about the topic and you would like further information, please contact our real estate experts and attorneys at info@italianrealestatelawyers.com. We will be happy to help you!
